Transit or trade?

Posted: ফেব্রুয়ারি 9, 2009 in Uncategorized

THE transit issue is back again to the forefront of discussions on Bangladesh-India relations. Apart from political reasons, some people are trying to justify granting transit to India on economic grounds. They are projecting the issue against the backdrop of globalisation and trade liberalisation and claiming that granting of transit will create additional trade for Bangladesh.

Other than a fixed “royalty” annually, I do not see how transit for India is going to create additional trade for Bangladesh. Instead, Bangladesh will destroy its chance of creating additional trade by moving goods/merchandise, either originating in or destined for India, through Bangladesh territory and through Chittagong port. Instead of granting transit, we can change our tariff duty regime, which will enable our traders to move Indian merchandise between western India and the “seven sisters.” Bangladeshi traders will also be able to move goods/merchandise, originating in or destined for the “seven sisters,” through Chittagong port. The process of such trade creation is described briefly in the following.

What is the purpose of transit? India wants to move goods (1) Between the northeastern India and western India; and (2) between northeastern India and rest of the world through Chittagong port. But, such movement of goods can take place through trade also. What is the modus-operandi of such trade?

It is simple. Bangladeshi traders will import goods from northeastern India and export them to western India/outside world. Similarly, they will import goods from western India/outside world and export them to northeastern India.

Thus, India gets movement of goods originating in India or destined for India through Bangladesh territory and through Chittagong port. And all this happens through the normal course of international trade.

Why does such trade not take place now? It is because of the existing tariff-duty regimes of both India and Bangladesh. Simple modifications in the present tariff practice of the two countries will result in normal international trade flow between western India, Bangladesh, northeastern India and rest of the world.

However, India will get this facility for moving only legally traded goods. If it wants to move unspecified goods in sealed containers, it will not be content with such a system. The movement of goods in sealed containers through Bangladesh territory is likely to invite attention from terrorists operating in northeastern India, and make Bangladesh vulnerable to terrorist attacks.

What will Bangladesh gain? An annual payment of, say, Tk. 500 cores. Not a big deal! Bangladesh will have to invest at least Tk. 5000 crores in infrastructure development. The price for transit should include similar transit provisions for Bangladesh to and from Nepal and Bhutan; uninterrupted and perpetual corridors for Bangladeshi enclaves in India for linking them with the mainland; ensuring fair share of Ganges water for Bangladesh; settlement of maritime boundary disputes to the satisfaction of Bangladesh.

This may be a “big” price for a “small” facility, but transit is the only “commodity” we have that India wants from Bangladesh. India should have fulfilled these demands a long time back, not as quid pro quo but as a gesture from a good and great neighbour. But, unfortunately, India did not care to do so. So, Bangladesh is left with no other option but to make a tall list of claims in lieu of transit facility wanted by India.

Besides, confusion should not be created about MOUs and Protocols. These are signed by the state or government heads to underscore the agreements in principle. It is the signing of agreements containing the details of implementing the principles that really matters (because devils live in the details). For some countries, even signing of an agreement is not enough — it must be ratified by their national parliaments.

For example, Bangladesh and India signed an agreement for exchanging our enclaves. Bangladesh returned Berubari to India accordingly, but India did not comply with the terms of the agreement by returning our enclaves because the Indian Parliament is yet to ratify the agreement.

So, if our government forgets the genuine and rightful claims of Bangladesh while granting transit facility to India, people will think that our statesmen are only too eager to concede to Indian demands — and not as eager to protect Bangladesh’s interest as a sovereign state. We would like to conclude by reminding our leaders of the words of a great statesman, Sir Winston Churchill

— a state has no permanent friend or foe, it has only interests.

[Adapted and abridged from the author’s original article “Why make fuss over transit, if trade can do the trick?” included in the book Top Priorities : Tough Decisions.]

The author is Professor of Economics in Chittagong University, currently serving (on lien) as Chairman, Dept. of Economics and Dean, School of Arts and Social Sciences, Southeast University. E-mail:

The daily star 09.02.2009



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